Importance of Physical Engagement in Banking

There is an ongoing, somewhat spirited debate around whether or not physical, in-person engagement is really important in banking today or whether or not it will be in the future. Credible industry thought leaders are even on opposite sides of the discussion! One point of view states that branches are on decline, and this will continue to new ‘lows’ but end somewhere short of total extinction. The general decline in branches will be accompanied by erosion in the importance of physical, in-person, face-to-face human interaction.

The other side sees branches in the unique position to deliver a balanced mix of digital and physical engagement that today’s consumer expects while also meeting divergent client needs. No other delivery channel is positioned to do this as well as the branch, staffed with knowledgeable bankers.

Bob Meara of Celent, recently published a blog post entitled “The Enduring Importance of Physical Engagement in Retail Financial Services.” Read the full blog post here. Two days later, Ron Shevlin of Cornerstone Advisors published a response in The Financial Brand entitled, “The Fading Importance of Physical Engagement in Retail Banking.” Both gentlemen are highly respected financial industry thought leaders but hold very divergent views on the future importance of Physical Engagement in Banking. Can both be correct? Here are some things to consider.

WHY GO TO THE BRANCH?

While the role of the branch is changing, it is still for most institutions the flagship of the brand. Today and down the road, people will come to the branch for what have been referred to as “destination services.” There are two broad categories of destination services in play. The first, and most often discussed, are banking services that people prefer to experience in person. The second, and admittedly less exciting, group of services, includes those where customers and potential customers must visit the branch.

As the future role of the branch evolves, we continue to see predictions about transformation, reconfiguration, and even extinction. But recent comments, including those from JD Power and Associates as part of their recent video series report entitled: Retail Banking Customer Trends: Capitalizing on Branch Interactions, reminds us that many prefer the human interface in a branch to other alternatives, especially when it involves a problem or more complex financial product.

Bob Meara, in his defense of the branch and the importance of physical engagement, stated the following: “In my opinion, in-person (physical) engagement will be of lasting importance in financial services for at least three reasons: 1) Most consumers rely on brick and mortar for commerce and will continue to do so. 2) Most retail deposits still take place at the branch. 3) Most banks do not offer a decent digital customer acquisition mechanism.”i While you could argue whether or not these specific services will be included forever in those ‘destination services’ for which customers prefer to come to the branch to complete, it is hard to deny today’s consumer preferences.

Less elegant but potentially important, are the narrow group of needed services that require that customers visit your branches. Many financial institutions, especially the largest ones, have abandoned these service offerings thereby creating a real opportunity for smaller institutions. What are these destination services? The list, as I mentioned, is short! Besides a number of merchant services, I can immediately think of two destination services for the consumer: safe deposit boxes and coin deposit processing. Both of these destination services require a branch visit and also provide an opportunity for staff to interact with clients.

SOMEONE TO TALK WITH SOMETIMES

Having a person to talk with is important to some bank customers some of the time. The branch traditionally provides the venue for a face-to-face meeting. If a face-to-face, in-person meeting is not important to some customers, the call center or a video conference might suffice.

Ron Shevlin makes the distinction between in-person assistance and talking with someone outside of the branch or by other means, including telephone, video, etc. In his blog, Ron stated that “…brick and mortar for commerce is dying.”ii He goes on to compare what is happening in banking today with the move in the late seventies to self-service gas stations. At that time, many thought that making folks pump their own gas would never take hold over an attendant doing it.

As I am old enough to remember this time fairly clearly, I would make the following statement. This transition did not happen overnight. Those pushing self-service technology initially also offered full-attendant service, but at an incremental price. So pumping gas, checking the oil, and cleaning the windshield were ‘extras’ that came at a price. After a while, no one was willing to pay the incremental price for full service, and that option was removed. For a time, the customer was given a choice as to how to complete the service station transaction. AND, even today, if someone has a problem completing the transaction there is a person available to help. While I think there might be a few other parallels to be drawn with today’s banking world, putting gas in your car is nowhere near the same as seeking information about an important financial decision or even completing a complex banking transaction. Force-feeding a ‘go-it-alone’ or ‘call for assistance approach’ will never meet all customers’ needs.

Access to a person remotely, as is the case in the example Ron used about dealings with his auto insurance agent, has been successful for him in resolving problems ‘over the phone.’ Again, what might work well for your auto insurance may not work for decisions related to your personal financial needs, and if there is ever a need to complete an accident report and get repairs made to your car, you’ll likely need to see someone in person for the estimate, adjustor approval, as well as the for the repairs.

Will people in the future generally complete more of their routine banking tasks remotely using totally self-directed technologies? Of course, just like they eventually turned away from needing the service station attendant. However, having someone in-person to talk with will remain a requirement at least some of the time. A recent Accenture study puts it this way, “87% of consumers will use their branches in the future – and want human interaction when they go there.”iii A voice on the phone or even a remote video connection is simply not the same. It is hard to deliver the level of personal service or build the type of ‘trusted advisor’ relationship most banks want to achieve with their clientele without face-to-face, in-person contact.

Bob Meara states, “We are at risk of oversimplifying things that are inherently complex. In doing so, we fail to appreciate diversity of customer needs or preferences. Much of the digital/branch debate speaks to binary outcomes. Reality is much more nuanced.”

BOTH AN EXPECTATION AND AN OPPORTUNITY

I would add that face-to-face, in-person engagement in the branch is not only an expectation for many customers, but also a real opportunity for the financial institution. With fewer branch visits today and that trend likely to continue, each engagement opportunity takes on greater importance. Bankers should be there to greet their clients and offer assistance as needed. Building trusted, long term relationships is vastly easier in-person than over the phone or a video connection.

So having a banker to talk with in-person, on-site at a branch is important to some customers, some of the time. It should also be construed as important to the financial institution. Conversely, having access to someone by phone or video could be adequate for some interactions with some people most, or even all, of the time. As digital technologies and physical resources evolve in banking, those institutions that can meet the full array of customer needs and expectations the best will thrive. So the real answer to the opening question, “Can both be Correct?” is likely “Yes, sometimes.”